On the spot checks OSC 2012 02 01

On the spot checks (OSC) 2012 02 01 -02 Virginijus Virbickas (v. virbickas@cpva. lt)

LEGAL BASE (national level) Main document: Rules on project financing and management approved by the order of the minister of finance (2007 -12 -19), articles 152 to 160. Scope: main aspects of the on the spot checks: - responsibility attributed to the implementing agency(IA); - obligatory character of the OSCs on the national level; - possibility of sampling (project level); - types of OSC (planned/unplanned); - general rules on planning of the OSC; - obligation for the IB to have internal procedures for OSC; - obligation to fill-in the OSC checklist (objective of the OSC and content); - other gen. rules on preparation for and carrying out of the OSC. SF 2007 -2013 m.

CLARIFICATION Within the structural assistance frameworks there are 3 possible on site visits during different phases: - EVALUATION of the application; objective: fact finding/advice to B; optional. - IMPLEMENTATION of the project (!) – ON THE SPOT CHECK. objective: justification of expenditure before it’s paid out; obligatory (in principle). - EX POST monitoring. objective: durability of the project; carried out on selected projects (ex: risk assessment). SF 2007 -2013 m.

General procedures for the OSC Within CPMA the OSC are carried out: Up to march 2010 : Quality assurance and control division; From march 2010: structural assistance department and (or) finance department (usually – by both); OSC are carried out by at least 2 persons: 1 project manager + 1 finance officer (usually). At least once during the project lifetime (except for technical assistance projects – in some cases OSC carried out every 2 years) SF 2007 -2013 m.

Objectives of the OSC The OSC is defined by its objectives and scope. Objective of the OSC (general in nature): (i) Proper implementation (Ascertain as to whether the beneficiary is (ii) implementing the grant agreement properly); Progress (Ascertain as to whether the progress of project activities corresponds to the information set out in the documents submitted to the CPMA (payment claims, reports, supporting documents etc. ); Achievements and Results (activities/indicators); Check the achievements and the results of the Project by comparing them to those set out in the grant agreement; (i) Other aspects of the project (ii) Prevention (especially for intermediate OSC in big scale projects); SF 2007 -2013 m.

Types of OSC PLANNED UNPLANNED Listed in the annual plan for the OSCs; Not listed in the annual plan (ex. implemented earlier) Has a general purpose spelledout previously; Carried out (mostly) with the specific purpose (incorrect or misleading information, information in the press etc. ); Usually carried out at the end of the project implementation term. Usually carried out when need arises. Type of the OSC is irrelevant for the scope, content or the participants of the OSC. All the aspects, listed in the OSC check list must be verified at least once. SF 2007 -2013 m.

OSC: step by step (7 steps) We can artificially distinguish those OSC related steps: 1. Planning; 2. Decision (on carrying out of OSC) making; 3. Preparation; 4. Actual carrying out of OSC; 5. Filling-in of the OSC check list and the report; 6. Transferring information to the SFMIS (IT system); 7. Follow-up (discrepancies and irregularities) SF 2007 -2013 m.

1. Planning When: plan is established by the responsible person at the beginning of each year; Information source: IT systems (SFMIS and CPMA IT system); Approved by the head of the Unit of Structural assistance department. Renewal: as the need arises. Problems: Because of the dynamics of the projects (postponing, early implementation) the plan is „difficult“ to implement to the letter, thus it‘s indicative. Important: to have the plan as up-to-date as possible because of the planning of staff (medical equipment expert, engineers etc. ) and other ressources; SF 2007 -2013 m.

2. Decision making TIMING: Main focus - progress of the project; OSC usually carried out at the end of the project implementation; WHO: Project manager (planned OSC); Person resp. for OSC (unplanned OSC). SF 2007 -2013 m.

3. Preparation Important: communication with the beneficiary; As for the preparatory work for him; As for the persons, that might be called in to assist during the OSC (construction company representatives etc. ); Notification: in writting no later than 3 w. days before the OSC. exception is made for the cases when the notification of the beneficiary may affect the results of the OSC; Regsitration of the OSC on the registrer of the OSC; Analyse information available to CPMA; Pre-prepare the OSC checklist (form is generated from SFMIS); Possibility of sampling within the project (not obligatory); SF 2007 -2013 m.

4. Actual OSC I The OSC consists of two types of control: Activites control (documents + fact): Documents (order, legal status/nature of activity of B. ) Copies vs. Originals; Documents vs. factual circumstance. Financial control (documents + accounting): a separate accounting system or an adequate accounting code for all transaction in the project (accounting system). copies of payment claims and original supporting documents for the expenses and payment of expenses (documents). SF 2007 -2013 m.

4. Actual OSC II Quality – correspondance of goods/services to the contract; Quantity – scope; Timing – deadlines; Nature of use – premises/goods; Sustainable development – complience with the principle/measures; Gender equality/non discrimination - complience with the principle/measures; Visibility measures (included in „Quality“, quantity, timing control) SF 2007 -2013 m.

4. Actual OSC III MOST COMMON PROBLEMS: 1. B did‘t do its homework (preparation for the OSC): v Documents not prepared (losing time); v Part of facilities/supplies not accessible or partly accessible. 2. Uncooperative B (not very common); 3. Change of persons who have been working with the project; 4. Part of the documents kept in electronic format; 5. Unclear documents (for the purposes of the OSC). SF 2007 -2013 m.

5. Check list & Report v REQUIREMENTS / Practice ü FORM approved by the order of the minister of finance; ü 2 exemplars; ü Filled–in obligatory for each OSC ; ü Usually filled-in on site (otherwise sent by mail); ü Signed by those invoved in the OSC (B and CPMA); refusal to sign (? ); v COMPOSITION (III parts) ü I part: general information (automaticaly generated and exported from SFMIS); ü II part: filled in manually (taken from the form approved); ü III part : Report: § Results and findings of the OSC; § Recommendations and obligations (to do) for the B; § Might be of significance for the ex post control. SF 2007 -2013 m.

6. Transferring information to the SFMIS q Registration The OSC is registered within SFMIS; Deadline – 10 working days from the OSC. q. Uploading of documents (. pdf) Copy of the OSC check list + Report. SF 2007 -2013 m.

7. Follow-up v SFMIS – monitoring tool (+ possibility of planning also). ü Follow-up on deadlines for recommendations/obligations to B; ü Monitoring of the disrepancies; v„Finalized“ For the final payment to be maid the OSC status on the SFMIS must be „finalized“. v Conditions for „finalized“: ü No discripancies identified; ü Discrepancies eliminated (corrected or duly explained); ü Impossible to eliminate or duly explain the discrepancy (insignificant discrepancy); ü Initiation of the investigation on the (possible) irregularity. SF 2007 -2013 m.

MOST COMMON IRREGULARITIES In this case we mean deviations, not approved by CPMA / violating contractual arrangements. DOCUMENTS: ü Lack of documents; ü Copies does not correspond to the original submitted on site (rare); ü Disorder. v WORKS: ü Deviation from the Grant Agreement (change of place works are being done); ü Deviation from the contract (technical specifications, technical project etc. ); - Change of materials, quality, quantity of works; - Works declared as completed are actually not done. SF 2007 -2013 m.

MOST COMMON IRREGULARITIES II v SUPPLIES: ü Deviation from the Grant Agreement (change of place works are being done); ü Deviation from the contract – models / technical characteristics (worse). v SERVICES: ü Lack proof that services have actually been provided (most common for works – technical project expertise, works‘ supervision, relevant reports as proof of services provided); ü Extent of services provided Services provided don’t correspond to the contractual provisions. OTHER (Deviation from the Grant Agreement): ü Facilities/supplies are not used at all; ü Facilities/supplies used not according to the purpose, specified in the Grant Agreement; SF 2007 -2013 m.

MEASURES TAKEN v In the OSC check-list ü Things to do for Beneficiary (Obligations regarding the discrepancies/implementation of the project); ü Recomendations. v POSSIBLE OUTCOMES: ü Discrepancies - Corrected / eliminated / explained; ü If NOT – investigation and possible reduction of support amount (other measures). The investigation is carried out by the CPMA. Findings & Recommendations submitted to IB. Intermediate Body makes a decision. SF 2007 -2013 m.